Surprisingly little is know about Long-Term Care Hospitals (LTCHs), their role in markets for post-acute care (PAC) and how their practices have changed in recent years in response to Medicare's prospective payment system (the LTCH-PPS). LTCHs are accredited acute care hospitals and primarily serve long-staying patients with complex medical conditions. LTCHs have historically played a fairly minor role in the health care system, [unreadable] but in recent years have grown quickly in number, in Medicare outlays and in importance. The policy issues surrounding LTCHs highlight just how little is known about LTCHs' role and practices and reflect largely unanswered questions about how distinct payment systems may interact and influence treatment and admission decisions. As the US population ages and as the site of medical care continues to shift away from the acute hospital setting, it is important that the value of care delivered in particular PAC settings is well understood. This understanding is a necessary component to efficient allocation of health resources. LTCHs are generally the most expensive PAC setting and payment rates for clinically similar patients have been as high as 12 times the rates received by other PAC providers. LTCHs have an extremely uneven distribution across the country: some cities have multiple LTCHs while several states have no LTCHs in operation. The relative costliness of LTCH care and their uneven distribution raise questions as to the 'necessity' of LTCH care. On one hand, markets without LTCHs have not experienced worse health outcomes than those with LTCHs (MedPAC 2003a). On the other hand, the benefits of relatively intense long-term hospital care may be concentrated in the small population typically served by LTCHs. This dissertation has three specific aims. First, this dissertation will describe LTCHs and their role in markets for PAC vis-[unreadable]-vis other co-existing PAC providers (skilled nursing facilities (SNFs) and inpatient rehabilitation facilities (IRFs)). This analysis will identify the extent that LTCHs may compete with other providers for patients, the extent that LTCH admissions are targeted among the narrow set of patients most likely to benefit from LTCH care, and identify market factors potentially related to LTCH location decisions. Second, this dissertation will test how LTCHs have responded to the LTCH-PPS. Because hospitals must qualify as LTCHs for Medicare payment, LTCHs face competing financial incentives under prospective payment. This analysis will relate competing financial incentives under PPS to changes in length of stay and LTCHs' practice patterns. [unreadable] Finally, this dissertation will measure the additional value of LTCH care over its PAC alternatives by comparing the health outcomes of a narrow set of patients. This analysis will use variation in Medicare payment rates for clinically similar patients across PAC settings (LTCHs, SNFs and IRFs) to identify the 'relative price effect' of treatment intensity on patient outcomes in PAC. [unreadable] [unreadable] [unreadable] [unreadable]